Drawing on risk mitigation theory, this article examines whether the improvement of firms’ social performance reduces debt financing costs (CDFs) in China, the world’s largest emerging market. Employing both the ordinary least square (OLS) and the two-stage instrumental variable regression methods, we find that improved corporate social responsibility (CSR) reduces the CDF when firms’ CSR investment is lower than an optimal level; however, this relationship is reversed after the CSR investment exceeds the optimal level. Firms with extremely low or extremely (...) high CSR are subject to a higher CDF. The results also suggest that the optimal CSR level for small firms is higher than that for large firms. This study is the first to document a U-shaped relationship between CSR and CDF and also the first to investigate this relationship within an emerging market context. (shrink)

Does a board with greater gender diversity make better investment decisions? Drawing on Austrian economic cycle theory and work groups theory, we argue that such board openness will help male board members to overcome gender biases, discrimination, and conflicts; integrate different perspectives under the economic cycle and crisis; and foster an environment in which better decisions are made. The results of an empirical study of 14,609 firm-quarter observations from 1,555 listed firms in China between 2007 and 2009 strongly support our (...) arguments. We find that a Chinese board is more likely to accept female directorship during an economic crisis than during an economic prosperity stage. Boards with greater gender diversity are more likely to make tough, counter-cyclical investments to improve firm performance during a crisis. Our study enriches the board decision-making literature by exploring the impacts of board gender diversity on firm performance within the context of an economic crisis. The results of our study also carry significant managerial implications for overcoming gender stereotypes, biases, and prejudices on a board. (shrink)

This study examines the impact of mandatory Corporate Social Responsibility reporting on firms’ financial reporting quality using a quasi-natural experiment in China that mandates a subset of firms to report their CSR activities starting in 2008. We find that mandatory CSR disclosure firms constrain earnings management after the policy. The result is robust to a battery of sensitivity tests and more prominent for firms with lower analyst coverage. Further analyses reveal that upward earnings management by mandatory disclosure firms is more (...) likely to be caught after the policy. The findings suggest that mandatory CSR disclosure mitigates information asymmetry by improving financial reporting quality. (shrink)

Drawing on both a managerial discipline perspective and an information intermediary perspective, we explore how media coverage of a firm’s controlling shareholder influences firm valuation in corporate China. Using 366 listed family firms in China from 2003 to 2006, we find that firms in which controlling shareholders receive more neutral media reports enjoy higher valuation, whereas negative media reports on controlling shareholders impose adverse effects on firm valuation. Interestingly, favorable media coverage of the controlling shareholders does not enhance firm value. (...) Further analyses reveal that ownership structure and audit quality moderate the relationship between media coverage and firm valuation. Our study complements the emerging literature on the monitoring role of the media on the stock markets. (shrink)